TMI Blog2018 (10) TMI 1982X X X X Extracts X X X X X X X X Extracts X X X X ..... hat if payment of services has been increasing the turnover has also been increasing. It is the case of the taxpayer that payment has been made for beneficial services as per OECD Guidelines of 2010 to cater the specific needs of the taxpayer necessary for business of the taxpayer in India. Moreover, had these services been availed of by the taxpayer from a third party, it would have entailed more cost. Revenue Officer cannot decide while sitting on the armchair of a businessman to decide as to what services are required. So far as question of deriving the benefit of such services is concerned, benefit may always not be the result of any business decision. But, in the instant case, the taxpayer has explained the benefits derived from rendering of services by the AE. When it is not in dispute that the business model of the taxpayer has not undergone any change since 2004 and payment of intra-group services have been formed to be at arm s length by the Revenue by passing detailed order by the TPO for AYs 2008-009, 2009-10, 2011-12 and 2012-13, available at pages 129 to 136 of Case Law Paper book, no reason whatsoever has been given by the ld. TPO to depart from the rule of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arm's length price, as is required under section 92CA(1) of the 'Income Tax Act, 1961 ( Act ). 4) The Ld. AO / Ld. TPO/ Ld. DRP erred on facts and in law determining the ALP of the Assessee's international transactions pertaining to payment of intra group services/management fee as NIL against the sum of Rs.10,692,707/- incurred by the Assessee and in doing so have grossly erred in the following manner 4.1 The Ld. AO/Ld. TPO/ Ld. DRP erred in facts and in law in holding that neither the Assessee has received any service and/ or benefit in lieu of the payment made by it for services availed nor was there was any need for such services/ payments; 4.2 The Ld. AO/Ld. TPO/ Ld. DRP erred in facts and in law by arbitrarily rejecting the Transactional Net Margin Method analysis adopted by the Assessee as the most appropriate method for benchmarking 4,3 The Ld. AO/Ld. TPO/ Ld. DRP erred in facts and in law in applying CUP method merely based on presumptions and without furnishing details of price charged in any comparable uncontrolled transaction which is in contravention of the provisions of Rule 10B of the Rules. 4.4 The Ld. AO/Ld. TPOI Ld. DRP err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,127,454 Management fee paid / project fee 10,692,716 Erection Charges received 138,151 Reimbursement of expenses paid 10,288,161 Reimbursement of expenses received CUP NA 531,880 NA NA Commission received TNMM OP/Sales 2,337,475 1.12% 2.70% Reimbursement of expenses paid TNMM OP/Sales 769,505 1.12% 2.70% Provision of Engineering Design Services TNMM OP/OC 21,057,318 119.85% 15.15% 4. For benchmarking the international transactions during the year under assessment, the taxpayer has adopted segmental approach for its manufacturing, trading and service transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up services was charged at cost plus mark-up of 6%. It is also not in dispute that services rendered by the AE during the year under assessment are similar and under the same agreement. It is also not in dispute that the quantum of payment of management fee constitutes only 1.39% of the total turnover of the taxpayer. It is also not in dispute that the taxpayer s turnover has increased five times in the last five years. 9. When we examine the findings returned by the TPO contained in paras 9.1 9.4 of the TP order in the backdrop of the aforesaid undisputed facts, he has merely based his findings on the reasons inter alia that the taxpayer has failed to prove that the services have been actually rendered and any benefit has been derived by the taxpayer; that services received are incidental in the nature due to long association; that the taxpayer did not file any evidence to support its claim that the services were actually provided; that under uncontrolled circumstances, any independent enterprise having skilled and sufficiently trained manpower would not have willingly paid for such services to the third party; that payment for liaison services allegedly provided by AE are no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vel requirement is necessary. So, it cannot be denied that market research services are of no benefits to the taxpayer operating in India as the sale has been increased five times during the last five years. The taxpayer has explained the services rendered and benefit derived at pages 272 and 273 of the Paper Book Vol.II. 14. So far as question of rendering information technology support services are concerned, it is the case of the taxpayer that AE has provided services of information technology support services, SOX compliance, controlled environment, organization and administrative and internal audit in conjunction with the business of the taxpayer and has derived benefit otherwise the taxpayer would have to hire a third party for availing such services necessary to run the business in order to resolve various issues. 15. The ld. TPO held that the taxpayer has not proved as to how these services were useful and that the services appeared to be very generic in nature and are in the nature of shareholder services nor any cost benefit analysis provided by the taxpayer. 16. When we examine the reasons given by ld. TPO for declining the contentions of the taxpayer for render ..... X X X X Extracts X X X X X X X X Extracts X X X X
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